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Heritage Reports Fourth Quarter 2020 Results

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CLEARWATER, Fla., March 3, 2021 /PRNewswire/ -- Heritage Insurance Holdings, Inc. (NYSE: HRTG) ("Heritage" or the "Company"), a super-regional property and casualty insurance holding company, today reported fourth quarter 2020 financial results.

Heritage Insurance (PRNewsFoto/Heritage Insurance Holdings, Inc) (PRNewsfoto/Heritage Insurance Holdings, In)
Heritage Insurance (PRNewsFoto/Heritage Insurance Holdings, Inc) (PRNewsfoto/Heritage Insurance Holdings, In)

Fourth Quarter 2020 Highlights

  • Net income of $2.8 million, or $0.10 per diluted share.

  • Book value per share of $15.94, up 1.8% year-over-year.

  • Gross premiums written of $282.3 million, up 19.9% year-over-year.

  • Launched partnership with The Hartford to offer bundled home and auto policies.

  • Favorable prior year reserve development of $4.7 million.

  • Net current accident quarter weather losses of $38.9 million, up substantially from $15.3 million in the prior year quarter. Current accident quarter weather losses include $24.4 million of catastrophe losses and $14.5 million of other weather losses.

  • Total capital returned to shareholders of $1.7 million, reflecting $0.06 per share regular quarterly dividend.

  • Began writing homeowners insurance in Maryland, representing sixteenth active state.

Ernie Garateix, the Company's CEO, said, "We were able to generate positive net income in the fourth quarter and full year and grow book value per share year-over-year despite experiencing unprecedented weather losses. I believe our solid organic growth platform and heightened focus on underwriting profitability position us well for 2021 and beyond."

Quarterly Dividend
Heritage's Board of Directors declared a quarterly cash dividend of $0.06 per share on the Company's common stock. The dividend will be paid on April 6, 2021 to shareholders of record as of March 15, 2021.

COVID-19 Update
We continue to monitor the short- and long-term impacts of COVID-19 and through December 31, 2020, we saw virtually no impact to our business. As a residential property insurer, we view our business as relatively insulated from a short-term economic slowdown, as property owners and renters generally view our products as a necessity.

While we acknowledge uncertainties associated with future economic conditions, we do not expect a material impact to our business going forward. We will continue to monitor economic conditions and, in the case of a prolonged economic slowdown as a result of COVID-19, will take necessary actions to mitigate any negative impacts to our business, operations or financial results.

Results of Operations
The following table summarizes our results of operations for the three and twelve months ended December 31, 2020 and 2019 (amounts in thousands, except percentages and per share amounts):



Three Months Ended December 31,




Year Ended December 31,





2020



2019



Change




2020




2019



Change































Revenue

$


159,548


$


138,502




15.2%



$


593,385



$


511,304




16.1%



Net income

$


2,808


$


12,818




(78.1)%



$


9,326



$


28,636




(67.4)%



Per share

$


0.10


$


0.44




(77.3)%



$


0.33



$


0.98




(66.3)%



























































Book value per share

$


15.94


$


15.66




1.8%



$


15.94



$


15.66




1.8%



Return on equity



2.5%




11.5%




(9.0)


pts



2.1%





6.6%




(4.5)


pts





























Underwriting summary




























Gross premiums written

$


282,324


$


235,446




19.9%



$


1,080,100



$


937,937




15.2%



Gross premiums earned

$


265,353


$


234,082




13.4%



$


996,842



$


924,247




7.9%



Ceded premiums earned

$


(113,923)


$


(103,005)




10.6%



$


(452,120)



$


(445,534)




1.5%



Net premiums earned

$


151,430


$


131,077




15.5%



$


544,722



$


478,713




13.8%































Ceded premium ratio



42.9%




44.0%




(1.1)


pts



45.4%





48.2%




(2.8)


pts





























Ratios to Net Premiums Earned:




























Loss ratio



70.4%




51.0%




19.4


pts



68.5%





57.1%




11.4


pts

Expense ratio



38.3%




38.3%




0.0


pts



38.5%





39.4%




(0.9)


pts

Combined ratio



108.7%




89.3%




19.4


pts



107.0%





96.5%




10.5


pts


*Return on equity represents annualized net income for the period divided by average stockholders' equity during the period.

Note: Percentages and sums in the table may not recalculate precisely due to rounding.

Ratios
Ceded premium ratio represents ceded premiums as a percentage of gross premiums earned.

Net loss ratio represents net losses and loss adjustment expenses ("LAE") as a percentage of net premiums earned.

Net expense ratio represents policy acquisition costs ("PAC") and general and administrative ("G&A") expenses as a percentage of net premiums earned. Ceding commission income is reported as a reduction of PAC and G&A expenses.

Net combined ratio represents the sum of net losses and LAE, PAC and G&A expenses as a percentage of net premiums earned. The net combined ratio is a key measure of underwriting performance traditionally used in the property and casualty industry. A combined ratio under 100% generally reflects profitable underwriting results.

Quarterly Financial Results
Fourth quarter 2020 net income was $2.8 million, down from net income of $12.8 million in the prior year quarter. The decrease primarily stems from elevated weather losses, partly offset by a tax benefit in the current year quarter.

Gross premiums written were $282.3 million, up 19.9% year-over-year, including growth in all states and product lines. Growth was partly attributable to rate increases, particularly in Florida

Premiums-in-force were $1.1 billion in fourth quarter 2020, representing a 17.6% annualized growth rate from third quarter 2020. The sequential increase stems from the same items impacting gross premiums written.

Gross premiums earned were $265.4 million in fourth quarter 2020, up 13.4% from $234.1 million in the prior year quarter. The increase reflects higher gross premiums written over the last twelve months.

The ceded premium ratio was 42.9% in fourth quarter 2020, down 1.1 points from 44.0% in the prior year quarter. The decrease primarily stems from gross premiums earned growth that modestly outpaced ceded premium growth and from year-end true-ups that benefited the current year quarter.

The net loss ratio was 70.4% in fourth quarter 2020, up 19.4 points from 51.0% in the prior year quarter. The increase primarily stems from higher current accident year weather losses.

The net expense ratio was 38.3% in fourth quarter 2020, unchanged from the prior year quarter.

The net combined ratio was 108.7% in fourth quarter 2020, up 19.4 points from 89.3% in the prior year quarter. The increase stems from a higher net loss ratio, as described above.

Book Value Analysis
Book value per share increased to $15.94 at December 31, 2020, up 1.8% year-over-year.


As Of


Book Value Per Share

December 31, 2020



December 31, 2019



December 31, 2018


Numerator:












Common stockholders' equity

$

442,344



$

448,799



$

425,333


Denominator:












Total Shares Outstanding


27,748,606




28,650,918




29,477,756


Book Value Per Common Share

$

15.94



$

15.66



$

14.43


Conference Call Details:
Wednesday, March 3, 20209:30 a.m. ET
Participant Dial-in Numbers Toll Free: 1-888-346-3095
Participant International Dial In: 1-412-902-4258
Canada Toll Free: 1-855-669-9657

Webcast:
To listen to the live webcast, please go to http://investors.heritagepci.com/. This webcast will be archived and accessible on the Company's website.

HERITAGE INSURANCE HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share amounts)

(Unaudited)




December 31,




2020



2019


ASSETS









Fixed maturities, available-for-sale, at fair value


$

561,011



$

587,256


Equity securities, at fair value



1,599




1,618


Other investments



26,409




6,375


Total investments



589,019




595,249


Cash and cash equivalents



440,956




268,351


Restricted cash



5,427




14,657


Accrued investment income



2,737




4,377


Premiums receivable, net



77,471




63,685


Reinsurance recoverable on paid and unpaid claims, net



355,037




428,903


Prepaid reinsurance premiums



245,818




224,102


Income taxes receivable



32,224




3,171


Deferred policy acquisition costs, net



89,265




77,211


Property and equipment, net



18,685




20,753


Intangibles, net



62,277




68,642


Goodwill



152,459




152,459


Other assets



18,004




18,110


Total Assets


$

2,089,379



$

1,939,670


LIABILITIES AND STOCKHOLDERS' EQUITY









Unpaid losses and loss adjustment expenses


$

659,341



$

613,533


Unearned premiums



569,618




486,220


Reinsurance payable



161,918




156,351


Long-term debt, net



120,998




129,248


Deferred income tax, net



18,477




12,623


Advance premiums



18,268




16,504


Accrued compensation



9,325




5,347


Accounts payable and other liabilities



89,090




71,045


Total Liabilities


$

1,647,035



$

1,490,871











Commitments and contingencies









Stockholders' Equity:









Common stock



3




3


Additional paid-in capital



331,867




329,568


Accumulated other comprehensive income, net of taxes



6,057




7,330


Treasury stock



(115,365)




(105,368)


Retained earnings



219,782




217,266


Total Stockholders' Equity



442,344




448,799


Total Liabilities and Stockholders' Equity


$

2,089,379



$

1,939,670


HERITAGE INSURANCE HOLDINGS, INC. AND SUBSIDIARIES


Consolidated Statements of Income and Other Comprehensive Income


(Amounts in thousands, except per share and share amounts)


(Unaudited)








































Three Months Ended
December 31,




Year Ended December 31,




2020



2019




2020



2019


REVENUE:


















Gross premiums written


$

282,324



$

235,446




$

1,080,100



$

937,937


Change in gross unearned premiums



(16,971)




(1,364)





(83,258)




(13,690)


Gross premiums earned



265,353




234,082





996,842




924,247


Ceded premiums



(113,923)




(103,005)





(452,120)




(445,534)


Net premiums earned



151,430




131,077





544,722




478,713


Net investment income



2,519




3,275





12,302




14,432


Net realized and unrealized gains



2,018




1,031





22,395




4,163


Other revenue



3,581




3,119





13,966




13,997


Total revenue



159,548




138,502





593,385




511,305


EXPENSES:


















Losses and loss adjustment expenses



106,618




66,798





373,387




273,288


Policy acquisition costs



36,032




28,113





128,276




107,906


General and administrative expenses



21,954




22,079





81,537




80,544


Total expenses



164,604




116,990





583,200




461,738


Operating (loss) income


$

(5,056)



$

21,512




$

10,185



$

49,567


Interest expense, net



2,033




2,021





7,972




8,523


Other non-operating loss, net



0




0





0




48


(Loss) Income before taxes


$

(7,089)



$

19,491




$

2,213



$

40,996


(Benefit) Provision for income taxes



(9,897)




6,673





(7,113)




12,360


Net income


$

2,808



$

12,818




$

9,326



$

28,636


OTHER COMPREHENSIVE INCOME:


















Change in net unrealized gains on investments



1,408




232





20,738




19,765


Reclassification adjustment for net realized investment gains



(2,018)




(2,025)





(22,395)




(1,734)


Income tax benefit (expense) related to items of other


















comprehensive income



142




573





384




(4,174)


Total comprehensive income


$

2,340



$

11,598




$

8,053



$

42,493




















Weighted average shares outstanding


















Basic



27,748,606




28,871,197





27,978,519




29,213,910


Diluted



27,753,317




28,878,440





27,988,966




29,232,981




















Earnings per share


















Basic


$

0.10



$

0.44




$

0.33



$

0.98


Diluted


$

0.10



$

0.44




$

0.33



$

0.98


About Heritage
Heritage Insurance Holdings, Inc. is a super-regional property and casualty insurance holding company headquartered in Clearwater, Florida. Through its insurance subsidiaries and a large network of experienced agents, the Company writes over $1 billion of gross personal and commercial residential premium across its multi-state footprint.

Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "or "continue" or the other negative variations thereof or comparable terminology are intended to identify forward-looking statements. This release includes forward-looking statements relating to (i) the impact of the COVID-19 pandemic on our business, results of operations and financial condition and our ability to navigate the uncertainty and mitigate the impact and (ii) our profitability position for 2021 and beyond given our solid organic growth platform and heightened focus on underwriting. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation: the success of the Company's underwriting and profitability initiatives; the continued and potentially prolonged impact of the COVID-19 pandemic on the economy, demand for our products and our operations; inflation and other changes in economic conditions (including changes in interest rates and financial and real estate markets), including as a result of the COVID-19 pandemic; the impact of new federal and state regulations that affect the property and casualty insurance market; the costs of reinsurance, the collectability of reinsurance and our ability to obtain reinsurance coverage on terms and at a cost acceptable to us; assessments charged by various governmental agencies; pricing competition and other initiatives by competitors; our ability to obtain regulatory approval for requested rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against us, including the terms of any settlements; risks related to the nature of our business; dependence on investment income and the composition of our investment portfolio; the adequacy of our liability for losses and loss adjustment expense; our ability to build and maintain relationships with insurance agents; claims experience; ratings by industry services; catastrophe losses; reliance on key personnel; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail); changes in loss trends; acts of war and terrorist activities; court decisions and trends in litigation; and other matters described from time to time by us in our filings with the Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 10, 2020 and subsequent filings. The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

Investor Contact:
Arash Soleimani, CFA, CPA
Executive Vice President
727.871.0206
Email: asoleimani@heritagepci.com

Cision
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SOURCE Heritage Insurance Holdings, Inc.